Retail and the Supply Chain: Don’t Wait Until the Next Bad Thing Happens!

The COVID-19 pandemic is a once-in-a-century event that will likely change shopping patterns in ways we couldn’t have predicted even as recently as 2019. However, the virus is just the latest disruptive force in an already risky global retail environment.

While we know that the crisis will ultimately end and that the business of commerce will resume, we also know that the world, especially the world of retail, has irrevocably changed. RSR Research has emphasized in its recent studies that virtually every one of the needed changes that retailers now regard as urgent were already important before. RSR partnered with LLamasoft for a benchmark study on the case for an artificial intelligence-enabled supply chain, conducted in June 2020. In the subsequent report, RSR wrote:

“The challenges highlighted by the pandemic are not new, only made more urgent ... most retailers have only recently begun to make the changes necessary to offer more localized and relevant value in stores, to offer new direct-to-consumer options, and to be able to respond quickly to sudden changes in demand.”

Retailers and their trading partners in the supply chain know that the value chain needs more agility than ever to respond to sudden changes in either supply or demand. But agility can’t be achieved at the expense of efficiency. Merchants understand that in order to react more quickly to rapid changes in their environment, they need to be able to model scenarios to help determine the best set of tactics to achieve desired sales outcomes at a hyperlocal level, and remain profitable.

They've also learned that planning and execution at a hyperlocal level require making millions of decisions. That’s where AI and machine learning (ML) technologies come into play. Businesses are realizing that the self-learning capabilities of AI and ML technologies are required to automate real-time operational decisions — e.g., when to change replenishment volumes or frequency to meet unusual spikes in demand at a hyperlocal level.

RSR asked retailers to identify the top three opportunities associated with AI enablement in the supply chain. It found that there's a high level of concurrence between overperforming “retail winners” and their lesser performing peers.

RSR Research, June 2020

That high degree of concurrence indicates that AI enablement is still “new” for many companies, regardless of their relative performance. And that, in turn, means that there’s a chance for non-winners to catch up if they only will seize on the opportunity.

We're not yet in a post-pandemic world, and we’ll likely be operating in a state of continuous disruption for some time to come. Assuming that the pandemic can be beaten back, the world economy still has to deal with an increasingly fractious global trade environment, weakened economies, political and social disruption, and the big cloud of global warming just over the horizon. What that means is that businesses everywhere (not just retailers) have got to get focused on redesigning their go-to-market strategies around agile responsiveness to rapidly changing conditions, and then figure out how to do that efficiently.

The good news is that the technologies available now are ready and able to assist.

Brian Kilcourse is a managing partner at RSR Research, a company focused on helping companies develop winning strategies with its industry-leading research focused on the extended retail industry.